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November 18, 2021

Going digital while avoiding a digital arms race. A blueprint for Credit Unions

Credit unions have a special mission to support their members’ financial well-being and help members achieve their goals. Whether it’s low-interest loans, high-yield savings accounts, payment forbearance or fee forgiveness, credit unions are highly focused on delivering greater value to their members. What if credit unions could do more to deliver this relationship-based model with the power of innovative technology, data-based insights, personalized advice, and automated solutions?

Credit unions today have a unique opportunity to embrace digital transformation. Going digital-first can help credit unions support their mission and grow their membership, by going deeper into the fundamental strengths that make credit unions special.

Let’s take a closer look at why digital-first is a winning strategy for forward-thinking credit unions.

Challenges in the Competitive Landscape for Credit Unions

Credit Unions are facing a changing competitive landscape:

  • Stronger competition from both national banks and challenger banks for new customers. According to Cornerstone Research, the Big Four national banks are now capturing 51% of new checking customers; among consumers that opened an account during the pandemic, 18% did so with a challenger digital bank.
  • The accelerating trend towards digital puts more pressure on credit unions to provide parity with banks’ digital capabilities. Bank of America recently announced that 44% of all its retail sales happen through digital channels; credit unions typically average between 20-30% digital sales.
  • Traditionally, credit unions (like community banks) have relied upon their local, branch-based customer relationships. Some progressive digital-first credit unions, however, like Alliant and First Tech Federal are attempting to differentiate through their digital experience.
  • Innovation at credit unions tends to be limited by the pace of new features offered by their digital platform providers/external partners like FIS, NCR, and Jack Henry.

According to a 2021 report from the Filene Research Institute, “In a world in which 59% of banking executives believe that the traditional, branch-based banking model will be obsolete by 2025 (The Economist 2020), credit unions risk losing revenue, relevance, and relationships if they cannot bring their digital service offerings up to par…

Credit unions may also need to adopt a more flexible and agile approach to partnerships, seeking to partner with a variety of companies—including fintechs—to fill gaps in the digital member experience.”

Digital transformation is imperative for credit unions, but they don’t have to go it alone or worry about digital services supplanting the credit union’s core competencies. Digital transformation can bring credit unions into a new era of more agile and personalized services while staying focused on their fundamental mission.

Credit Unions’ Competitive Advantages

Despite these challenges, credit unions also have some special advantages that can give them a competitive edge in the new digital-first financial services landscape:

  • Digital-first is an ideal fit for credit unions’ mission. As member-owned, member-centric, not-for-profit organizations, credit unions are focused on improving their members’ financial outcomes and financial well-being. Many of the higher-level digital banking solutions that big banks are starting to offer – automatic savings programs, etc. – are already a good fit with credit unions’ missions.
  • Credit unions tend to offer more attractive product benefits. Credit union deposit accounts, loans, and other financial products tend to have greater benefits associated with them in terms of higher yield deposits, lower APR loans, and lower fees.
  • Credit unions strive to understand their members’ individual needs. The more that credit unions know about their members’ unique financial goals, the more they can capitalize on digital capabilities to go deeper into those relationships. For example, imagine a credit union that, based on transaction data, could recognize a customer with higher than usual spend on car repair merchants. The credit union could reach out to that customer via digital channels, show the lower maintenance costs of new cars, and help the customer pre-qualify for a new car loan.
  • Credit unions are part of a strong and vibrant community. As member-driven organizations that have strong national associations, credit unions tend to more collaborative than competitive and are good at sharing best practices.

Despite the changes in the environment, basic member expectations still endure: know me, value me, advise me. Credit unions have a high level of customer trust and are uniquely suited to meet these needs, using the latest advancements in data and analytics.

4 Ways Credit Unions Should Respond to the Current Digital Transformation Environment

Credit unions have a unique opportunity to serve their members with better digital capabilities and data-driven insights. Here are a few ways that credit unions can accomplish this:

  • Establish a data foundation that allows the credit union to understand needs and proactively engage. Strengthen your organization’s data foundation by cleansing and enriching transaction data to understand the behavior of your members.
  • Communicate to members the value of the relationship. Credit unions have high-value products, but they’re often not as proactive as they could be in demonstrating the value of the member relationship over time. What if credit unions could more precisely communicate this value to their members? With advanced data analytics, credit unions can track and show, in vivid detail, how much benefit your members are getting from being part of your organization; not just when they sign up for an account, but ongoing, month after month.
  • Deliver personalized insights and advice as part of a member advocacy platform, not a traditional marketing campaign platform. Whether your membership is the military community, employees of a certain local company or government organization, members of a certain labor union, or a national membership base of digital-savvy customers who want higher-value financial products, advanced data analytics can help your organization deliver personalized insights and advice unique to that membership base and that credit union’s offerings.
  • Help members accomplish a “job” by designing relevant journeys (help me save for a goal, help me reduce debt, help me build wealth). Credit union members are often pragmatic and action-oriented in their financial goals. Credit unions can use digital technology to create automatic action-oriented programs to help members with specific jobs to be done: save, build wealth, pay down debt, start investing, or make progress toward a financial objective.

At Personetics, we believe that the future of credit unions is bright. Now more than ever, there are opportunities for credit unions to better deliver on their brand promise with advanced data and analytics capabilities. You don’t have to go it alone – there are advanced capabilities from providers that allow credit unions to compete with even the most sophisticated financial institutions.

Ready to learn more about how your credit union can strengthen your member relationships while embracing the digital-first future? Talk to Personetics today.

Want to explore how your bank can harness the power of AI to engage and serve customers? Request a demo now


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Jody Bhagat, President of Americas, Personetics

Jody Bhagat

President of Americas

ody brings deep operating experience in financial services – managing direct channels, launching digital ventures, and leading digital transformation programs. He was previously a Partner at McKinsey & Company, where he helped financial institutions define and execute digital transformation programs to drive customer growth and operating efficiency. Jody also served in senior digital operating roles at U.S. Bank, Wells Fargo, and Providian. In these positions, he led digital sales and service functions and direct-to-consumer businesses to deliver organic growth and enhanced customer experience. Jody has an MBA from Northwestern University and a BS in Computer Engineering from The University of Michigan.

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